When it comes to increasing profitability in today’s competitive environment, efficiency is the name of the game. And one of the best ways to boost efficiency is by utilizing treasury management tools that your bank offers.
In addition to helping increase operational efficiency, using treasury management tools can lead to a host of other benefits, including the following:
• Better cash flow
• Improved financial forecasting
• Lower fraud risk
• Increased automation
• Enhanced integration of internal data with data stored at the bank
Top Treasury Management Tools
Here are five popular treasury management tools that can help you improve efficiency at your business:
1. ACH electronic funds transfers—Sending and receiving funds electronically via the Automated Clearing House (ACH) is becoming more common. Each year, banks process approximately 25 billion ACH transactions totaling about $43 trillion.
Most ACH fund transfers are in the form of payroll direct deposits, tax payments (both federal and state), and electronic credits and debits. Using the ACH instead of mailing paper checks increases efficiency and control while also lowering payment processing costs. For example, it costs about $1.22 on average to process a paper check, but less than half this using the ACH.
2. Wholesale lockbox—This helpful tool improves receivables collection, which boosts cash flow. Instead of mailing checks directly to your business, your customers mail them to a special post office box that’s monitored continuously by the bank, which processes them immediately.
Using wholesale lockbox reduces mail and check processing float and accelerates cash availability. It also eliminates the need for an accounting employee to have to make trips to the bank to deposit checks, which increases productivity.
3. Wire transfers—This is another form of electronic funds transfer similar to the ACH except that wire transfers are made on a same-day basis (ACH transfers typically take two to three business days). Wire transfers are typically used for high-dollar payments that need to be transferred without delay, such as funds to close a real estate deal.
4. Remote Deposit Capture (RDC)—Like wholesale lockbox, this service also speeds up check processing and posting and accelerates cash flow. You can use software and a special scanner from your bank to deposit checks remotely from your office. RDC also eliminates employee trips to the bank, thus boosting employee productivity.
5. Positive Pay and ACH Positive Pay—The growing threat of check fraud that many businesses are facing today makes this service almost essential. With Positive Pay, you provide the bank with a check-issued file that the bank compares to all checks presented for payment. You are then alerted to any checks presented that don’t match the file and can make a pay or no-pay decision.
ACH Positive Pay works similarly for electronic payments. You give the bank a list of all vendors that are paid electronically. If any ACH payments are initiated to vendors that aren’t on the list, you’ll be alerted and can deny or approve the payment.
If you’re not using tools like these to increase efficiency, boost cash flow, and reduce fraud risk, you could be missing out on tremendous opportunities. Plan to sit down with your banker soon to discuss how your business could benefit by using treasury management tools.